BILL NUMBER: AB 2230	CHAPTERED  09/27/00

	CHAPTER   758
	FILED WITH SECRETARY OF STATE   SEPTEMBER 27, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 26, 2000
	PASSED THE ASSEMBLY   AUGUST 31, 2000
	PASSED THE SENATE   AUGUST 29, 2000
	AMENDED IN SENATE   JUNE 20, 2000
	AMENDED IN ASSEMBLY   MAY 9, 2000

INTRODUCED BY   Assembly Member Wiggins

                        FEBRUARY 24, 2000

   An act to add Section 6106.5 to the Public Contract Code, relating
to public contracts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2230, Wiggins.  Architectural and engineering services
contracts.
   Under existing law, special provisions govern contracts between
state agencies or departments and persons or entities providing
architectural, engineering, land surveying, environmental, or
construction project management services.  These provisions specify
negotiation procedures and establish deadlines for contract
formation.
   This bill would provide that any contract subject to the above
provisions shall provide that retained moneys may be paid into an
escrow account held by a state or federally chartered bank in this
state, if the estimated amount of money to be retained by the state
agency or department under the contract is greater than $10,000.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 6106.5 is added to the Public Contract Code, to
read:
   6106.5.  (a) "State agency," as used in this section, means those
departments defined in Section 10106 of the Public Contract Code.
   (b) "Contractor," as used in this section, means "Firm,"
"Architectural, landscape architectural, engineering, environmental,
and land surveying services," "Construction project management," and
"Environmental services" as defined in Section 4525 of the Government
Code.
   (c) State agencies shall include a provision in solicitations and
in contracts, where the estimated amount to be retained exceeds ten
thousand dollars ($10,000), and the retention continues for a period
of 60 days beyond the completion of phased services, to permit, upon
written request and the expense of the contractor, the payment of
retentions earned directly to a state or federally chartered bank in
this state, as the escrow agent.  The contractor may direct the
investment of the payments into securities, pursuant to paragraph
(d), and the contractor shall receive the interest earned on the
investments.  Upon satisfactory completion of the contract, the
contractor shall receive from the escrow agent all securities,
interest, and payments received by the escrow agent from the owner,
pursuant to the terms of this section.  State agencies, relative to
contracts entered into prior to enactment of this section, upon
written request of the contractor, and subject to the approval of the
state agency, may utilize the provisions of this section.
   (d) Securities eligible for investment under this section shall
include those listed in Section 16430 of the Government Code,
interest-bearing demand deposit accounts, or any other investment
mutually agreed to by the contractor and the state agency.
   (e) (1) Any contractor who elects to receive interest on moneys
withheld in retention by a state agency shall, at the request of any
subcontractor, make that option available to the subcontractor
regarding any moneys withheld in retention by the contractor from the
subcontractor.  If the contractor elects to receive interest on any
moneys withheld in retention by a state agency, then the
subcontractor shall receive the identical rate of interest received
by the contractor on any retention moneys withheld from the
subcontractor by the contractor, less any actual pro rata costs
associated with administering and calculating that interest.  In the
event that the interest rate is a fluctuating rate, the rate for the
subcontractor shall be determined by calculating the interest rate
paid during the time that retentions were withheld from the
subcontractor.  If the contractor elects to substitute securities in
lieu of retention, then, by mutual consent of the contractor and
subcontractor, the subcontractor may substitute securities in
exchange for the release of moneys held in retention by the
contractor.
   (2) This subdivision shall apply only to those subcontractors
performing more than 5 percent of the contractor's total fee.
   (3) No contactor shall require any subcontractor to waive any
provision of this section.
   (f) An escrow agreement used pursuant to this section shall be
null, void, and unenforceable unless it is substantially similar to
the following form:


              ESCROW AGREEMENT FOR SECURITY DEPOSITS

This Escrow Agreement is made and entered into by and between
_____________________________________________________________
whose address is ____________________________________________
hereinafter called "owner,"__________________________________
whose address is ____________________________________________
hereinafter called "contractor," and ________________________
whose address is ____________________________________________
hereinafter called "escrow agent."

   (1) Pursuant to Section 6106.5 of the Public Contract Code of the
State of California, upon written request of the contractor, the
owner shall make payments of retention earnings required to be
withheld by the owner pursuant to the professional consulting
services agreement entered into between the owner and contractor for
____ in the amount of ____ dated ____ hereafter referred to as the
"contract."
   (2) When the owner makes payment of retentions earned directly to
the escrow agent, the escrow agent shall hold them for the benefit of
the contractor until such time as the escrow created under this
contract is terminated.  The contractor may direct the investment of
the payments into securities pursuant to Section 6106.5(d) of the
Public Contract Code.  All terms and conditions of this agreement and
the rights and responsibilities of the parties shall be equally
applicable and binding when the owner pays the escrow agent directly.

   (3) The contractor shall be responsible for paying all fees for
the expenses incurred by the escrow agent in administering the escrow
account.  These expenses and payment terms shall be determined by
the contractor and escrow agent.
   (4) The contractor shall have the right to withdraw all or any
part of the principal or interest in the escrow account only by
written notice to the escrow agent accompanied by written
authorization from the owner to the escrow agent that the owner
consents to the withdrawal of the amount sought to be withdrawn by
contractor.
   (5) The owner shall have a right to draw upon the escrow account
in the event of default by the contractor.  Upon seven days' written
notice to the escrow agent from the owner of the default, the escrow
agent shall immediately distribute the cash as instructed by the
owner.
   (6) Upon receipt of written notification from the owner certifying
that the contract is final and complete, and that the contractor has
complied with all requirements and procedures applicable to the
contract, the escrow agent shall release to the contractor all
deposits and interest on deposits less escrow fees and charges of the
escrow account.  The escrow shall be closed immediately upon
disbursement of all moneys on deposit and payments of fees and
charges.
   (7) The escrow agent shall rely on the written notifications from
the owner and the contractor pursuant to Sections (1) to (6),
inclusive, of this agreement and the owner and contractor shall hold
the escrow agent harmless from the escrow agent's release,
conversion, and disbursement of the securities and interest as set
forth above.
   (8) The names of the persons who are authorized to give written
notice or to receive written notice on behalf of the owner and on
behalf of the contractor in connection with the foregoing, and
exemplars of their respective signatures are as follows:


On behalf of the owner:                  On behalf of the contractor:

_________________________                ____________________________

Title                                    Title

_________________________                ____________________________

Name                                     Name

_________________________                ____________________________

Address                                  Address

_________________________                ____________________________


On behalf of the escrow agent:
______________________________
Title
______________________________
Name
______________________________
Signature
______________________________
Address
______________________________

   At the time the escrow account is opened, the owner and contractor
shall deliver to the escrow agent a fully executed counterpart of
this Agreement.

   IN WITNESS WHEREOF, the parties have executed this Agreement by
their proper officers on the date first set forth above.


Owner                           Contractor
_____________________________   ________________________________

Title                           Title
____________________________    _________________________________

Name                            Name
_____________________________   ________________________________

Signature                       Signature
_____________________________   ________________________________
